Davie Yards to Gradually Resume Operations

Wednesday, February 18, 2009

Davie Yards Inc. (TSX:DAV) announced that it has reached agreements with its clients for new price increases of $35m on its existing contracts. In addition Davie's largest client, Cecon ASA has informed that it has received a $200m loan offer replacing the lost loan facility with the Norwegian bank DnB Nor. While Cecon completes the loan documentation, Davie has negotiated a $20m prefunding facility which will enable it to gradually resume its operations.

Davie Yards has agreed to amendments to the shipbuilding contracts for Cecon's three vessels and Ocean Hotels' two vessels under construction. Under the terms of the amendments, the clients have accepted price increases totaling $35m in addition to the $60m that were agreed upon in September last year. Davie has developed a new production plan based on a reopening of operations in the beginning of March, and has reached agreements with its clients for new delivery times for all five ships corresponding with the new production plan.

On December 17th, 2008 Export Development Canada (EDC) announced it would make available to Davie $300m in guarantees and loans. However, Davie's largest client, Cecon ASA lost its $200m loan facility with DnB Nor January 20th this year, and since then, Davie, EDC and Cecon have worked to change part of the guarantee and loan scheme with EDC to a new $200m loan facility for Cecon.

"We are very pleased with the cooperation of EDC, which has issued a term sheet to Cecon for a $200m loan facility to help finance Cecon's new building program of three offshore construction vessels at Davie", said Steinar Kulen, Davies CEO. "To avoid further delays, EDC has also granted a bridge loan to Davie of $20m, the funding of which is subject to certain conditions and which will be reimbursed upon funding of the $200m loan to Cecon, and Cecon again can start paying their installments being due".

Although Davie is planning to gradually resume its operations upon receipt of its prefunding facility, shipbuilding at the yard will only resume once the $200m loan is made available to Cecon.